Income Taxes (Tables)

12 Months Ended

Dec. 31, 2012

Components of Income from Continuing Operations Before Income Taxes

The components of income from continuing operations before income taxes were as follows:

	2012			2011			2010
U.S.	$	394		$	(98	)	$	(403	)
Foreign		(70	)		1,161			951
	$	324		$	1,063		$	548

Schedule of Provision for Income Taxes on Income from Continuing Operations

The provision for income taxes on income from continuing operations consisted of the following:

	2012			2011			2010
Current:
Federal*	$	85		$	10		$	33
Foreign		167			427			409
State and local		9			(1	)		(7	)
		261			436			435
Deferred:
Federal*		129			28			37
Foreign		(227	)		(211	)		(320	)
State and local		(1	)		2			(4	)
		(99	)		(181	)		(287	)
Total	$	162		$	255		$	148

* Includes U.S. taxes related to foreign income

Reconciliation of U.S. Federal Statutory Rate to Alcoa's Effective Tax Rate for Continuing Operations

A reconciliation of the U.S. federal statutory rate to Alcoa’s effective tax rate for continuing operations was as follows:

	2012			2011			2010
U.S. federal statutory rate		35.0	%		35.0	%		35.0	%
Taxes on foreign operations		(0.1	)		(11.0	)		(5.4	)
Permanent differences on restructuring charges and asset disposals		10.8			-			0.7
Audit and other adjustments to prior years’ accruals		3.5			(1.1	)		1.2
Noncontrolling interests		3.8			0.8			2.6
Statutory tax rate and law changes		(0.4	)		0.8			(5.1	)
Tax law change related to Medicare Part D		-			-			14.4
Changes in valuation allowances		15.2			2.3			(8.7	)
Amortization of goodwill related to intercompany stock sales/reorganizations		(7.7	)		(2.8	)		(5.2	)
Change in legal structure of investment		(4.1	)		-			-
Interest income related to income tax positions		(1.3	)		(0.2	)		-
Company-owned life insurance/split-dollar net premiums		(3.9	)		(0.2	)		(1.8	)
Other		(0.8	)		0.4			(0.8	)
Effective tax rate		50.0	%		24.0	%		26.9	%

Schedule of Components of Net Deferred Tax Assets and Liabilities

The components of net deferred tax assets and liabilities were as follows:

	2012					2011
December 31,	Deferred tax assets			Deferred tax liabilities		Deferred tax assets			Deferred tax liabilities
Depreciation	$	104		$	1,015	$	74		$	933
Employee benefits		2,742			46		2,668			51
Loss provisions		368			17		325			9
Deferred income/expense		53			203		45			181
Tax loss carryforwards		2,186			-		2,035			-
Tax credit carryforwards		508			-		477			-
Derivatives and hedging activities		117			16		109			43
Other		324			297		315			288
		6,402			1,594		6,048			1,505
Valuation allowance		(1,400	)		-		(1,398	)		-
	$	5,002		$	1,594	$	4,650		$	1,505

Schedule of Expiration Periods of Deferred Tax Assets

The following table details the expiration periods of the deferred tax assets presented above:

December 31, 2012	Expires within 10 years			Expires within 11-20 years			No expiration*			Other*			Total
Tax loss carryforwards	$	332		$	886		$	968		$	-		$	2,186
Tax credit carryforwards		370			73			65			-			508
Other		-			-			762			2,946			3,708
Valuation allowance		(212	)		(659	)		(244	)		(285	)		(1,400	)
	$	490		$	300		$	1,551		$	2,661		$	5,002

* Deferred tax assets with no expiration may still have annual limitations on utilization. Other represents deferred tax assets whose expiration is dependent upon the reversal of the underlying temporary difference. A substantial amount of Other relates to employee benefits that will become deductible for tax purposes over an extended period of time as contributions are made to employee benefit plans and payments are made to retirees.

Schedule of Changes in Valuation Allowance

The following table details the changes in the valuation allowance:

December 31,	2012			2011
Balance at beginning of year	$	1,398		$	1,268
Increase to allowance		45			157
Release of allowance		(48	)		(25	)
Foreign currency translation		5			(2	)
Balance at end of year	$	1,400		$	1,398

Reconciliation of Unrecognized Tax Benefits (Excluding Interest and Penalties)

A reconciliation of the beginning and ending amount of unrecognized tax benefits (excluding interest and penalties) was as follows:

December 31,	2012			2011			2010
Balance at beginning of year	$	51		$	46		$	48
Additions for tax positions of the current year		-			-			-
Additions for tax positions of prior years		39			13			30
Reductions for tax positions of prior years		(7	)		(3	)		(5	)
Settlements with tax authorities		(18	)		(4	)		(22	)
Expiration of the statute of limitations		-			-			(5	)
Foreign currency translation		1			(1	)		-
Balance at end of year	$	66		$	51		$	46